advice from a fake consultant

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Sunday, November 29, 2009

On Stimulating The Future, Or, "It's The Ytterbium, Stupid!"

We’re diving deep into “geek world” today with a story that combines economic hardball, the periodic table of the elements, and a barely noticed provision of the Defense Authorization Act that seeks to break a monopoly which today gives China near-absolute control over the materials that make cell phones, electric cars, wind turbines, and pretty much every other tool of modern life possible.

If we successfully break the monopoly, we’ll be able to create millions of new manufacturing jobs in this country—and if we don’t, somebody else owns the 21st Century.

Ironically, the global warming we’re trying to fight with new green technologies might be an ally in our efforts to make those very same green technologies happen.

There’s a revolution in industrial processing going on, rare earths are at the center of it all...and in today’s story, the revolution will be televised.

“Everything in the Universe comes out of nothing.Nothing—the nameless is the beginning...”

Rare earths are materials that are, as it turns out, not always especially rare; nonetheless, they all have properties that are quite rare, indeed. You’ll find them hanging out in their own special section of the Periodic Table of the Elements, kept well isolated from all the others.

For example, your television and computer monitor rely upon the element europium, which makes the color red appear on your screen. There is nothing else known to exist that can be used for the same purpose. Therefore, the ability to make TVs and computer monitors is entirely dependant on access to this material.

Cerium is the most effective agent available for polishing glass, and if it wasn’t for cerium, your eyeglasses—and everything else in the world with a lens—would be a lot tougher to produce...and they would be lenses of lower quality, to boot.

Erbium lasers work better than carbon dioxide (CO2) lasers for facial surgery, and its unique ability to emit and amplify light under optical excitation makes it essential (and, at the moment, irreplaceable) when producing either fiber optic cable for transmitting data or the optoelectronic “building blocks” of the next-generation data storage systems that will eventually replace every hard drive and memory chip on the planet today.

And what is the rare earth application with which you are probably the most familiar?

Magnets.

As it turns out, if you mix the rare earth element neodymium with iron and boron, you get what is by far the most powerful magnetic material available—and it’s easily fabricated into lots of useful shapes.

These magnets have found their way into the headphones and speakers you listen to, the hard drive in your computer, your DVD player, every power everything in your car (they’re used in electric motors), and, eventually, into the electric motors that are likely to be actually propelling your car.

(Driving a Prius or some other hybrid vehicle? You’re driving around with about a kilo of neodymium under the hood, a number that’s soon expected to double.)

Of course, I could be wrong.

The rare earth application you’re most familiar with might be...batteries.

The nickel metal hydride battery (NiMH) has been the rechargeable battery of choice for about a decade now, turning up in everything from your cell phone to your camera to hand tools. This type of battery can be fabricated using several chemical formulations; the key here is that either cerium or another rare earth element, lanthanum, are essential to whatever formulation is chosen. Other rare earths are used as additives to make these batteries work better in high-temperature applications.

(Just for the record, that hybrid or “all-battery” vehicle you’re driving has at least 25 pounds of lanthanum on board.)

“New and improved” in rechargeable battery circles means lithium ion batteries; they also require lanthanum (although europium, yttrium, and protactinium are being considered as experimental additives).

These materials are also critically important if you’re in the business of building missiles or rockets or military communications systems—or civilian communications systems, for that matter.

So Why Is All Of This Such A Big Deal?

It’s a big deal because there is, shall we say...a bit of a supply problem.

You may recall that europium is the only thing that can make the color red on a TV set, and from the 1960s until the 1980s the only place in the world that was producing any rare earth element (REE) in any quantity was Molycorp’s Mountain Pass mine, in California’s Mojave Desert.

All of that changed in the 1990s as China decided to “...[i]mprove the development and applications of rare earth, and change the resource advantage into economic superiority", to quote Chairman Jiang Zemin. Since that time China has worked to expand ore production at its two major deposits as well as to expand the associated refining and fabrication industries that actually turn raw metals into finished products.

China was able to do this primarily because of two big cost advantages: cheap labor and access to REE as a byproduct of other mining activities (which basically means that if your copper mine’s ore also contains trace elements of REE, you do it cheaper than digging for just the REE). REE, we should mention, do not readily “gather” in large and easily mined “veins”, unlike other minerals, making mining more difficult.

Because of environmental problems at the Mountain Pass operation and price competition from the Chinese, there has been no US mining for REE since 2002, and today, more than 95% of the world’s REE production is based in China.

And all of a sudden, the Chinese might not have any spare REE for the rest of us.

What’s happened is that all those companies moving to China to do fabrication of REE material are raising the local demand, and it’s now being suggested that exports of REE from China could soon end. (A quick example: lanthanum and neodymium demand and supply were equal in 2008; this means supply will have to increase before lots of new hybrid or battery-only cars can hit the road.)

Some are suggesting there may be additional motives on the part of the Chinese Government, but I was unable to substantiate those rumors.

(The complete supply picture is a bit more complex; this because scrapping today’s consumer products for tomorrow’s REE is also an option, but at some currently unknown cost and efficiency.)

So Now What?

So that was the bad news; here’s the (potential) good news, located about 850 pages deep in a conference report that finalized the Legislative Branch’s work on the 2010 National Defense Authorization Act:

The House bill contained a provision (sec. 828) that would require a report on the usage of rare earth materials in the supply chain of the Department of Defense.The Senate amendment contained a similar provision (sec. 837).The House recedes with an amendment combining the requirements of the two provisions..."

Of course, we better do more than just write a report, as all too often “write a report” is actually just another way of saying “ignore problem for now”—especially if, as the not enacted Rare Earth Supply-Chain Technology And Resources Transformation (RESTART) Act Of 2009, said:

“China’s ability—and willingness—to export REE’s is eroding due to its growing domestic demand, its enforcement of environmental law on current producers, and its mandate to consolidate the industry by decreasing its number of mining permits. The Chinese government’s draft rare earths plan for 2009 to 2015 proposes an immediate ban on the export of dysprosium, terbium, thulium, lutetium and yttrium, the “heavy” REE and a restriction on the exports of all the other, light, rare earth metals to a level well below that of Japan’s 2008 demand alone.”

Another source of good news: we have friends who also have access to REE, including Canada, Iceland, and in what has to be a “silver lining, dark cloud” moment, Greenland, who is just about a month away from gaining control over its natural resources from Denmark and assessing what, for the moment, appears to be the world’s largest known find of REE on the country’s southwest coast.

(This good news is, of course, balanced against the fact that access to the site will be much, much, easier...thanks to global warming.)

Of course, access to ore isn’t enough, and whatever supply is located, we’ll still need the ancillary capabilities that we lack today to refine and fabricate these metals into the American-made products we want to produce over the course of the next several decades.

So how’s that for a tale of geekiness?

The entire world that we know today—and the one we want for the future—depends on a small batch of odd metals, 95% of which currently come from China, who appears to be leveraging that advantage in a way that is not just an economic threat, but a National Security threat as well.

We have the potential to fix the problem, if we are so inclined, but we better get to it, and quickly, as our clock seems to be running a bit short.

And we need to do more than just dig holes in the ground. We need to establish an entire production chain—otherwise we’ll be mining ore that we’ll be shipping to...China...which is what we’re trying to avoid in the first place.

You know, a green economy is one thing...but a green economy that trades Big Oil for Big Battery is quite another—and if you’re just trading one “resource master” for a different one, what's the point?